Dealing with Risk and Uncertainty in Southwest Airlines - Economics

0Running head: ECONOMICS
Economics
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1ECONOMICS
TABLE OF CONTENTS
QUESTION 1.............................................................................................................................2
QUESTION 2.............................................................................................................................3
QUESTION 3.............................................................................................................................4
QUESTION 4.............................................................................................................................4
QUESTION 5.............................................................................................................................5
QUESTION 6.............................................................................................................................6
Reference list..............................................................................................................................7

2ECONOMICS
Introduction
Southwest Airlines is one of the famous airlines in the United States of America and
is also known to be one of the world’s low-cost carrier (Fu et al., 2019). This airline is known
to carry the most domestic passengers of any United States airline.
QUESTION 1
Evaluate a company’s recent actions dealing with risk and uncertainty
There are always a presence of high risk and uncertainties involved in the business of
airlines. The difference between risk and uncertainty is that uncertainty is an unknown risk
whereas risk is he measurable uncertainty (Zenger & Gubler, 2016). The risk involves the
possibility of losing some of the original investment. It is the likelihood that an investment
will be affected by various conditions of macroeconomy such as regulation of government,
political stability and exchange rates. On the other hand, uncertainty is the occurrence of the
unpredictable outcomes.
 Responding as quickly as possible: one of the best possible way of dealing with risks
in the airline uncertainty is ensuring that they respond within the shortest period of
time.
 Another risk that is faced by the South West Airlines is that they have to run their
flight even when the seats are not full. In such situations, the airlines have the risk of
earning low revenue. The Southwest is known to deal with the risk by pursuing a low
cost strategy or no frills strategy where passengers of the single class of service are
offered the lowest possible fares which makes air travel affordable to a huge number
of people of the United States.